News

Chinese regulation will squeeze fund market growth

Risk managementChinese government regulation to reduce risk in financial services is hampering fundraising in the asset management sector. The assessment, from ratings agency Moody’s, highlighted a regulatory clampdown on shadow banking that began in late 2016, “resulting in flat growth or even a decline in the assets under management”. “In the near term, Moody's expects growth to remain tepid as reducing risk in the financial system remains a top government priority in 2018,” said the firm in a statement. Despite the slowdown, analysts at the agency predicted a significant rise in assets over the next decade. Nino Siu, a senior analyst, forecasts an inflow of up to 40 trillion renminbi ($6.3 trillion) over the next ten years into mutual funds and private funds. The agency added that regulatory efforts to control risk would, in time, benefit asset managers by helping to create a stronger financial sector. “The explosive growth of China's asset management industry has increased financial system interconnectedness, as well as liquidity and credit risk, and in that regard we view the regulatory crackdown to reduce these risks as credit positive,” said George Xu, an analyst. ©2018 funds global asia

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